Source: Radio New Zealand
Experts say in this environment, it’s near impossible to predict where the prices will land. RNZ / Dan Cook
It doesn’t matter where we get our oil from – in a globally connected world, New Zealand is at the mercy of wildly fluctuating prices as long as the Iran conflict continues
Where is the price of petrol heading?
Who knows.
“The market is so volatile, and so uncertain. I’ve never seen changes at the speed that is occurring currently,” says the AA’s fuel expert Terry Collins.
Brent crude is going up and down with every development in the Iran war, every utterance from the US president, and every move by oil-producing nations to either increase supply – or hoard it for themselves.
At the start of this week pundits were predicting we’d be paying $3 a litre for 91 at the pump, and that hit on Thursday afternoon.
Today on The Detail we speak to two people keeping an eagle eye on developments about what the drivers of oil prices are, how it gets into the country, and how secure our supply is.
Collins says in this environment, it’s near impossible to predict where the prices will land.
“Unpredictability means that oil companies have to price in risk as a premium. They actually don’t know what they’re going to be paying for their fuel in the coming weeks, because on one day it could be – as in the case between Friday and Monday – a $30 difference for a barrel of oil, which is about 30 cents retail at the pump.
“What we do know is we’ve got plenty of fuel in the country, and we’ve got plenty of fuel on the way.”
The key issue is that around 20 percent of the world’s oil passes through the narrow Strait of Hormuz, which is effectively closed because of the war in the Middle East.
We don’t directly buy the crude oil that goes through the Strait – we get a refined product from Asian countries including Singapore and South Korea. But the oil those countries buy to refine passes through the Strait. And when other nations find their supplies constricted through war, they will be bidding for petrol in the same market as we are.
“And there’s other things that are making the market jump around,” he says.
“One minute the Americans are talking about releasing some of their strategic fuel reserves – okay that will only be for America but it will reduce demand globally.
“They’re talking about lifting sanctions with Russia, which would allow more Russian oil to come back on.”
The International Energy Agency (IEA) yesterday announced it would release 400 million barrels of oil, the largest such move in its history, to try to rein in crude prices – New Zealand, as a member of the IEA, will contribute just under 1.6 million barrels, according to Associate Energy Minister Shane Jones.
“So every time an announcement’s made, the market seems to jump around, and until these things are settled that’s a very uncertain time.”
Collins still thinks petrol will be more expensive next week than this week, but says there’s no need to panic buy.
He also points out that it’s not petrol, but rather diesel, that drives our economy, especially at harvest time when all the rural farm machinery is in action … but diesel is in use for everything from bitumen to plastics manufacturing, and also of course for truck deliveries, including to our supermarkets.
And to all those people lamenting the loss of the Marsden Point oil refinery, Collins doesn’t believe keeping it in action would have made a difference – he explains why in the podcast.
The chief executive of Waitomo Group, Simon Pareham, advises drivers to shop around when it comes to petrol prices, and there are a couple of apps on which you can do that.
But he also says this isn’t a supply crisis.
“What we’re seeing … is that geo-political risk is being priced in,” he says.
Pareham says there’s no need for government action on prices yet, but if the crisis goes on for long it could always slice excise taxes and replace that funding with the extra GST income.
“The government’s asked the Commerce Commission to keep a watchful eye on the situation so we welcome that,” he says.
“High fuel prices are not good for anyone, and especially [as] we’re on the cusp of this economic recovery in New Zealand.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand